Short-Term Rental Investing: Where It Works Best in 2025

The short-term rental (STR) market has matured—but the opportunity is far from over. In 2025, the right properties in the right locations are still generating double-digit cash-on-cash returns for savvy investors.

But not all markets are created equal. Regulations, tourism trends, and local economics all play a role in STR success. The best STR investors are shifting from just buying Airbnb properties to strategically targeting high-yield, regulation-friendly markets.

This guide highlights the top U.S. markets for short-term rental investing in 2025, plus what makes them ideal for STR success.

What Makes a Market Ideal for STR Investing?

Before we list the best cities, here’s what to look for in a profitable STR market:

• STR-friendly regulations (limited restrictions or clear permit processes)
  
• Year-round tourism or business travel
  
• Strong average daily rates (ADR) and occupancy rates
  
• Affordable entry price relative to rental income potential
  
• DSCR loan eligibility (for investors seeking scalable financing)
  

Pro Tip: Use platforms like AirDNA, Mashvisor, and Rabbu to research market data and revenue projections before investing.

🔝 Best Markets for STR Investing in 2025

These markets offer the right combination of regulation, demand, and ROI potential—backed by data from STR analytics platforms.

🌲 1. Gatlinburg, TN

Why It Works:

• One of the top vacation markets in the U.S.
  
• Year-round demand driven by Great Smoky Mountains tourism
  
• No statewide restrictions on STRs
  

Performance Highlights:

• ADR: $250–$400
  
• Occupancy: 60–70%
  
• Strong ROI for cabins and family-friendly homes
  

Investor Tip: Ideal for DSCR-backed STR loans with vacation rental zoning.

🏜 2. Scottsdale, AZ

Why It Works:

• Premier destination for golf, events, and luxury travelers
  
• STRs allowed with registration; enforcement is straightforward
  
• High-income visitor profile = strong ADR
  

Performance Highlights:

• ADR: $300–$500+
  
• Occupancy: 55–65%
  
• Peak demand during winter and spring
  

Investor Tip: Opt for 3–5 bedroom homes with pools for top-tier returns.

🌴 3. Kissimmee/Orlando, FL

Why It Works:

• Consistent demand from Disney and Universal tourism
  
• One of the top global STR markets
  
• Florida remains a no-state-income-tax and STR-friendly state
  

Performance Highlights:

• ADR: $180–$300
  
• Occupancy: 65–75%
  
• Strong performance for mid-size homes near theme parks
  

Investor Tip: Look for properties in STR-zoned subdivisions near I-Drive or the parks.

🏞 4. Broken Bow, OK

Why It Works:

• Emerging cabin market with high demand for rural luxury escapes
  
• Low acquisition costs and minimal STR regulation
  
• High-performing for weekend and short-term getaways
  

Performance Highlights:

• ADR: $275–$425
  
• Occupancy: 50–65%
  
• Top performer for large group or pet-friendly cabins
  

Investor Tip: Excellent for DSCR or HELOC-financed vacation homes.

🏔 5. Asheville, NC (Surrounding Areas)

Why It Works:

• Strong tourism for Blue Ridge Parkway and arts scene
  
• STRs restricted in city core, but legal in surrounding counties
  
• High-paying, experience-driven traveler demographic
  

Performance Highlights:

• ADR: $200–$350
  
• Occupancy: 60–70%
  
• Cabins and small boutique homes perform best
  

Investor Tip: Look just outside city limits for STR-permitted zones with strong demand.

🏖 6. Gulf Shores, AL

Why It Works:

• Popular beach destination with lower cost than Florida
  
• Relaxed STR rules with high seasonal demand
  
• Family travel, spring breakers, and snowbirds boost performance
  

Performance Highlights:

• ADR: $250–$400+
  
• Occupancy: 55–70%
  
• Beachfront or water-access homes perform best
  

Investor Tip: Watch for HOA restrictions—some buildings allow STR, others don’t.

🧳 7. Boise, ID (Mid-Term Hybrid Potential)

Why It Works:

• Rapid population growth, tech migration, and outdoor appeal
  
• High demand for mid-term rentals (30+ days)
  
• Light regulatory environment with flexible zoning
  

Performance Highlights:

• ADR: $150–$225
  
• Occupancy: 70%+ (mid-term)
  
• Steady returns with less seasonality
  

Investor Tip: Combine Airbnb + mid-term strategy for cash flow and stability.

Watch Out for Regulation-Heavy Markets

These cities have increasingly strict STR regulations, making them tougher for new investors:

• New York City, NY – Highly restricted (most STRs now illegal)
  
• Los Angeles, CA – Limited to primary residences with strict caps
  
• San Francisco, CA – Complex permitting, heavy enforcement
  
• Chicago, IL – Registration required, zoning limits
  
• Denver, CO – Only allowed in primary residences
  

Before investing in any city, check local ordinances and HOA rules.

Financing Your STR Investment

Short-term rentals are eligible for:

• DSCR loans (based on rental income, not personal income)
  
• HELOCs (for down payments or renovations)
  
• Private money or bridge loans
  
• Conventional loans (if used as a second home)
  

✅ DSCR loans are ideal for STRs with high cash flow potential—just ensure you provide AirDNA data or a 1007 rent schedule if required.

Final Thoughts

Short-term rental investing is still one of the fastest ways to generate cash flow, build equity, and scale fast—but it requires local knowledge and a legal-first approach.

By focusing on STR-friendly cities with strong occupancy and ADR, you’ll position your portfolio for success in 2025 and beyond.